Shaw’s cable business grows for first time since 2010

Communications Inc. is reporting traction in its cable
business after launching a new television product, winning more new customers
than disconnections for the first time in almost seven years.

After years of steadily losing TV customers to both cord cutting and Western
rival Telus
Corp.’s IPTV service, Shaw said on Wednesday that it actually added 13,000 cable
subscribers in the three months ended May 31.

It was the first net increase in a quarter since the end of its fiscal year
in 2010, and the Calgary-based company said the shift was due to a combination
of factors, including the premium television service BlueSky TV it first introduced in January.

Shaw also attracted 21,000 new Internet customers in the third quarter,
thanks in part to a high-speed promotion it has been pushing since last summer.
As customers “bundle” multiple products, the company said the momentum from
Internet sales also helped reduce the number of cable disconnections.

The new TV service – which includes a voice-controlled remote for intuitive
searching and is based on U.S. giant Comcast
Corp.’s cloud-based technology – has been available to all customers in the
company’s cable service area since April. Shaw president Jay Mehr said it is helping not just to reduce
customer turnover but also attract new customers in general.

However, the marketing expenses associated with rolling out the new TV
product led to a crunch in profit margins, the company said, reporting that its
operating income decreased slightly in the third quarter, slipping 0.5 per cent
to $550-million.

That was despite a 2.8-per-cent increase in overall revenue to $1.31-billion,
which was roughly in line with analyst estimates.

Profit fell 81 per cent to $133-million, down from $704-million in the same
period last year when the company reported a $630-million gain on the sale of
its Shaw Media business to Corus
Entertainment Inc.

On the wireless side, Shaw’s Freedom Mobile business added just 20,000 new
customers in the period, coming up short of analyst estimates for around

Shaw had 1.1 million wireless subscribers by the end of May, but said two
weeks ago it has much greater ambitions, with Mr. Mehr stating the company wants to add “millions
and millions and millions” of subscribers to its mobile business, which operates
in Ontario, British Columbia and Alberta.

His comments came after the company announced plans to sell its ViaWest Inc. U.S.
data centre business for $1.675-billion (U.S.), acquire valuable new wireless
airwaves from Quebecor
Inc. for $430-million (Canadian) and invest
$350-million in putting some of that new spectrum to work in its mobile

Mr. Mehr
reiterated those plans on Wednesday, noting that it will take “another year or
so until we get all of the pieces in place that we’ll be able to be a meaningful
player,” but saying the company is “prepared to make those investments.”

Analysts said the company’s strong cable subscriber numbers were a high point
of the quarter, noting that while Shaw executives had predicted a return to
positive growth in cable customers, analyst estimates had been lower. But
momentum on cable will not immediately translate to better cash flow, warned
Securities analyst Maher Yaghi, as “capital expenditures on wireless will
likely be ongoing for a couple of years.”

Shaw also reported $43-million in restructuring expenses in the quarter,
which it said was primarily owing to “employee-related costs.” It has recently
taken steps to integrate Toronto-based Freedom Mobile more closely into Shaw’s
Calgary-based business, eliminating duplicated roles in finance and human

The company also said in April it plans to shut down Shaw TV community
stations in Vancouver, Calgary and Edmonton, cutting approximately 70 positions,
and redirect certain funding to local news programming at Global stations now
owned by Corus (a
decision made possible by a CRTC ruling last year).

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